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Polarisation, Populism and Hyperinflation[s]: Some Evidence from Latin America

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  • Manoel Bittencourt

    ()
    (Department of Economics, University of Pretoria)

Abstract

We test for the populist view of state capture in Latin America be- tween 1970 and 2003. The empirical results-based on the relatively novel panel time-series data and analysis - confirm the prediction that recently-elected governments coming into power after periods of po- litical dictatorship, and which are faced with high economic inequal- ity and demand for redistribution, end up pursuing unfunded populist [re] distributive policies. These policies, in turn, lead to bursts of hyper- in?ation and therefore macroeconomic instability in the region. All in all, we suggest that the implementation of democracy as such requires not only the 'right political context'- or a constrained executive-to work well, but it also must come with certain economic institutions, (e.g. central bank independence and a credible and responsible fiscal authority), institutions which would raise the costs of pursuing populist policies in the first place.

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Bibliographic Info

Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200921.

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Length: 18 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:pre:wpaper:200921

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Keywords: Polarisation; populism; hyperinflation; Latin America;

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